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The year of unintended
consequences for steel
A focus on foreign-sourced steel only
caused steel imports to increase
By John Packard
Steel imports and steel prices have behaved in an odd fashion this year. That’s why steel buyers need to consider both history and politics to truly understand the market forces at play.
In 2014 foreign steel imports flooded the U.S. market. That increased rate of
imports continued into the first half of 2015, at which time the domestic steel
mills filed antidumping (AD) and countervailing duty (CVD) cases on coated,
cold-rolled, and hot-rolled steels. The U.S. Department of Commerce investigation found most of the accused countries guilty of dumping, and duties were
assigned to curb or eliminate imports from those countries into the U.S.
In 2014 total steel imports of all products averaged 3,694,837 net tons per
month, with the biggest importers being the domestic steel mills themselves.
U.S. steel mills brought in 866,061 net tons of semifinished steel monthly on
average (mostly slabs with some billets). Domestic steel mills also were responsible for a portion of the hot-rolled that was imported, which can be traced to
mills like USS/POSCO, Steelscape, and CSN.
As seen in Figure 1, OCTG (oil country tubular goods) averaged 332,024
net tons per month, hot-rolled 358,663 tons, cold-rolled 214,660 tons, galvanized 276,105 tons, Galvalume and aluminized 85,076 tons, and plate coils and
lengths a combined 331,463 tons.
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Certain types of steel imports have had incredible swings in shipment numbers over
the past several years.
The U.S. did see total imports decline in 2016 when the monthly average
dropped below 3 million tons/month, coming in at 2,751,789 net tons. OCTG
dropped to 94,747 net tons, hot-rolled to 239,797 net tons, cold-rolled to 183,509
net tons, galvanized to 258,171 net tons, and plates (coils and sheet) to 207,048
net tons/month, on average. Products designated “other metallic,” which is
the U.S. Department of Commerce designation for Galvalume and aluminized
steels, did not decline; they averaged 86,138 net tons per month during 2016.
When 2017 began, the 2016 import trend continued into January and February. Those two months averaged 2,768,059 net tons of total foreign steel imports.
Then President Trump announced he had charged Commerce Secretary
Wilbur Ross with investigating whether a healthy domestic steel industry is essential to U.S. national security. The belief by most in the steel community was
that the results were “fixed,” and that Section 232 trade actions against foreign
steel imports were inevitable. The prospect of losing access to foreign suppliers
did not move steel buyers to buy more domestic steel, however, but just the
opposite. The amount of foreign steel being imported into the U.S. once again
jumped close to the 2014 pre-AD/CVD levels. The months of March, April, May,
June, July, August, and September averaged 3,443,274 net tons of imported foreign steel.
As seen in Figure 1, imports of foreign cold-rolled steel are averaging 224,655
net tons, which is approximately 10,000 tons more per month more than the
pre-AD/CVD year of 2014. Galvanized steel imports also are above 2014 levels,
now averaging 293,914 net tons. Steel Market Update (SMU) also is seeing the
“other metallic” steel, mostly Galvalume, averaging 105,467 net tons/month,
which is considerably more than the 2014 average of 85,076 net tons.
SMU expects foreign steel tonnages to drop in the coming months, not so
much because of further government trade actions, but because of ordinary
market forces. Foreign steel prices have been rising. The areas where we expect
foreign imports to continue to win market share from domestic mills is in cold-rolled and coated steels. These are the products for which the domestic mills
raised the traditional spread between their base prices and that of hot-rolled
coil. What was once a $100 to $120 per ton spread was pushed to $200/ton. The
SMU Steel Index reported hot-rolled as averaging $600/ton during the week of
Nov. 6; cold-rolled base pricing $185/ton higher; galvanized $170/ton higher;
and Galvalume $200/ton higher than the hot-rolled average base.